Assignment on decision analysis

Assignment Help Business Management
Reference no: EM131284032

Assignment: Decision Analysis

Note: Decision Trees must be typed/drawn (in Word, Excel etc.) or neatly handwritten/scanned and uploaded to D2L.

Scenario: LMD Pharmaceuticals has just developed a new drug for combating obesity. During the preliminary drug trials, it was also found to be effective in lowering cholesterol. LMD must now submit the drug for FDA approvals. They must decide if they will submit the drug for approval as both obesity & cholesterol (together), or for obesity only.

For the obesity only option, there is a 0.20 probability of approval. For obesity & cholesterol, there is a 0.10 probability of approval. The estimated net present value of the profits for an obesity only drug is $480 million if it is approved and -$30 million if it is not approved (cost of development, clinical trials etc.). The estimated net present value of the profits for an obesity and cholesterol drug is $680 million if it is approved.

If the FDA does not approve for both obesity & cholesterol, LMD can choose to sell the rights to an outside firm for further development to recoup some of the estimated development losses, resulting in an estimated net present value of $5 million, or it can re-submit the drug for obesity only approval. It has been determined that the resubmission for obesity has a 0.18 probability of approval and a 0.82 probability it will not be approved. If approved for obesity only, the estimated net present value of the profits is $400 million, and -$80 million if it is not approved (total costs of approval processes).

a) For the above scenario, set up and solve the associated decision tree to portray the decision strategy with the highest expected net profit. Below the tree, state the overall decision strategy determined and the expected net profit.

b) Provide the risk profile (table) of the strategy you specified in part a.

c) Determine the EVPI for assessing the probability of approval for both obesity & cholesterol prior to submitting to the FDA. (show calculations/steps taken)

Reference no: EM131284032

Questions Cloud

Determining the volume of sales dollars : As a prospective owner of a club known as the Red? Rose, you are interested in determining the volume of sales dollars necessary for the coming year to reach the? break-even point. You have decided to break down the sales for the club into four? cate..
What are the steps involved in the preparedness cycle : Name the ways that the National Preparedness Directorate guides national preparedness efforts
Renminbi worth of fruit every year : Price a tree (in dollars) that delivers 60 Renminbi worth of fruit every year for 10 years with an interest rate of 15% assuming the Renminbi depreciates 1% per year
Describe what makes their disaster planning needs unique : Name five special needs populations, and describe what makes their disaster planning needs unique.
Assignment on decision analysis : Scenario: LMD Pharmaceuticals has just developed a new drug for combating obesity. During the preliminary drug trials, it was also found to be effective in lowering cholesterol. LMD must now submit the drug for FDA approvals. They must decide if t..
Why students believe the historic style was used by designer : why students believe the historic style was used by the contemporary designer.
When tariffs are imposed on european imports of shoes : When tariffs are imposed on European imports of shoes from China and Vietnam, who stands to gain? Who stands to lose?
What are the four types of disaster exercises : What kinds of training opportunities are provided by the federal government? What agencies provide these courses, workshops, and other programs?
What role do local chapters or business offices of regional : What Role do local chapters or business offices of regional, national , or international corporations play in the determination of meeting sites? It is from book called convention management and service, chapter 5.

Reviews

Write a Review

Business Management Questions & Answers

  Caselet on michael porter’s value chain management

The assignment in management is a two part assignment dealing 1.Theory of function of management. 2. Operations and Controlling.

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. Due to increase in the preference for light beer drinkers, Chris Prangel wants to introduce light beer version in Mountain Man. An analysis into the la..

  Mountain man brewing company

Mountain Man Brewing, a family owned business where Chris Prangel, the son of the president joins. An analysis into the launch of Mountain Man Light over the present Mountain Man Lager.

  Analysis of the case using the doing ethics technique

Analysis of the case using the Doing Ethics Technique (DET). Analysis of the ethical issue(s) from the perspective of an ICT professional, using the ACS Code of  Conduct and properly relating clauses from the ACS Code of Conduct to the ethical issue.

  Affiliations and partnerships

Affiliations and partnerships are frequently used to reach a larger local audience? Which options stand to avail for the Hotel manager and what problems do these pose.

  Innovation-friendly regulations

What influence (if any) can organizations exercise to encourage ‘innovation-friendly' regulations?

  Effect of regional and corporate cultural issues

Present your findings as a group powerpoint with an audio file. In addition individually write up your own conclusions as to the effects of regional cultural issues on the corporate organisational culture of this multinational company as it conducts ..

  Structure of business plan

This assignment shows a structure of business plan. The task is to write a business plane about a Diet Shop.

  Identify the purposes of different types of organisations

Identify the purposes of different types of organisations.

  Entrepreneur case study for analysis

Entrepreneur Case Study for Analysis. Analyze Robin Wolaner's suitability to be an entrepreneur

  Forecasting and business analysis

This problem requires you to apply your cross-sectional analysis skills to a real cross-sectional data set with the goal of answering a specific research question.

  Educational instructional leadership

Prepare a major handout on the key principles of instructional leadership

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd